Matt Wade

THE NSW Treasurer, Mike Baird, says the sale of the state's electricity generators is the "final piece" in a three-prong privatisation program that will create an additional infrastructure war chest of $7 billion to $10 billion.

But there are warnings that that will not be enough to deliver the long-term infrastructure improvements the state's gridlocked voters are hoping for.

The sale or long-term lease of the electricity generators is expected to net the state's coffers between $3.3 billion and $6.5 billion. Up to $4 billion more is anticipated from the long-term lease of Sydney's desalination plant and the Port Botany container terminal, which were announced in September.

"It does provide an infrastructure capital chest," Mr Baird said. "Our hope would be it will be in a $7 billion to $10 billion range."

Advertisement

The funds raised by these three privatisations will be reinvested in new infrastructure and is in addition to the $62.6 billion earmarked for infrastructure spending over the next four years in the budget.

Mr Baird said the privatisations would improve efficiency and help boost productivity in NSW. "I think the micro-economic reform part of this is as important as the release of capital," he said.

The O'Farrell government could have generated a much bigger sum of money but decided against offloading the state-owned electricity transmission and distribution network, or "poles and wires", which are worth around $30 billion.

Some economists have warned the government's unwillingness to pursue a more aggressive asset sales strategy, coupled with its commitment to a AAA credit rating, will unnecessarily constrain new infrastructure spending.

Deloitte Access Economics director Chris Richardson said the state government should not curtail well-targeted infrastructure improvement for the sake of its credit rating.

"If it comes down to a choice between infrastructure that makes sense and the AAA rating, NSW should go for the infrastructure that makes sense," he said.

Mr Richardson said the AAA rating was not the test of good government.

"There is an eminently respectable economic case for borrowing for infrastructure and in NSW, where the need for infrastructure is particularly strong, the ratings agencies should be happy because it improves the infrastructure of the state,'' he said. ''Get over it."

A Grattan Institute economist, Saul Eslake, said "a bolder premier than Barry O'Farrell" would have sold all the state's electricity assets or would be prepared to borrow more and relinquish the AAA credit rating.

"An elephant stamp from the ratings agencies should not be the be all and end all of good state government," he said

"More borrowing might be the right choice to make given the constraint that O'Farrell has imposed on himself by being unwilling to go the whole hog [on the sale of electricity sector assets] as recommended by Nick Greiner."